Macroeconomics

The European Central Bank is set to cut interest rates for the seventh time, lowering the deposit rate to 2.25 per cent from 2.5 per cent. This move follows President Donald Trump’s recent tariff increases, which have unsettled markets and darkened the economic outlook across Europe. Analysts expect the rate reduction to support economic expansion rather than fuel inflation. Although the ECB had considered pausing its monetary easing campaign, recent developments have prompted policymakers to push for further support. Views on where rates may ultimately settle remain varied, but the consensus indicates a continued downward trajectory.

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Carbon Markets

‍Europe’s power sector saw emissions rise in the first quarter of 2025, reaching the highest level since early 2023. A decline in clean energy output forced utilities to burn more coal and natural gas, resulting in 390 million metric tonnes of CO₂ emissions. Germany, Poland, the Netherlands, and the United Kingdom were key contributors, each recording multi-year highs in fossil fuel generation. With fossil fuel-fired power up seven per cent year on year, the trend threatens to reverse a multi-year decline in power emissions. However, increased solar output anticipated in the coming months may help utilities scale back fossil fuel use.

In the voluntary carbon space, the UK is positioning itself as a global hub, with calls for a roadmap to integrate compliance and voluntary carbon markets. A new report emphasises the need to scale demand and support removal credits to offset emissions in hard-to-abate sectors. Meanwhile, the Malaysia Forest Fund has signed an MoU with Gold Standard to align national forestry carbon initiatives and build capacity.

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Renewables and Biofuels

‍Germany’s onshore wind sector is on course for a record year in 2025, with over 4,000 megawatts of new approvals and a 40 per cent increase in installations during Q1. This momentum reflects strong policy backing and the country’s aim to meet 80 per cent of electricity needs with renewables by 2030. Sufficient capacity has already been approved to supply this year’s subsidy auctions, with North Rhine-Westphalia playing a significant role.

In the UK, the National Energy System Operator expects the country’s power grid could experience its lowest-ever electricity demand this summer, with transmission demand dipping below 13.4 gigawatts at times. Increased solar generation and affordable electricity imports are expected to keep supply stable. Meanwhile, Ofgem is set to confirm major reforms to electricity grid connections, fast-tracking clean energy and tech projects while eliminating “zombie” projects that clog the queue.

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Gas and Biofuel Markets

EU officials have shelved plans to sanction Russian LNG imports, citing resistance from member states and uncertainty regarding alternative supplies. Instead, the European Commission is preparing a roadmap to phase out reliance on Russian energy by 2027. Discussions with the US are ongoing, with Brussels hoping to secure increased American LNG exports in exchange for tariff concessions.

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Environmental and Sustainability Regulation

‍The EU has relaxed reporting requirements under its anti-deforestation law, which comes into effect in December. Companies will now need to submit due diligence statements annually rather than per shipment. Countries will be categorised as high, standard, or low risk, with lower-risk nations facing fewer compliance obligations. The change aims to reduce the burden on businesses, though some campaigners have warned it could weaken enforcement.